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QATAR 5

ongoing effort of Qatar’s nation building strategy.

“The best way for Barwa Bank to contribute to

Qatar’s nation building is through high-profile

quality transactions: our role as Joint Lead

Manager and Book runner for the UK Sukuk is

an excellent example,” says Sheikh Mohammad.

“We are, of course, already heavily engaged in

the physical building of our nation, given our very

significant involvement in many of Qatar’s major

infrastructural projects. More generally, successful

nations need successful institutions: successful at

home and successful internationally. That’s where

we can contribute most.”

The Sukuk was a first for the UK but it was not

a first for Barwa Bank. The bank had been involved

in a number of high profile Sukuk issues including

for the Republic of Turkey, Saudi Arabia’s Islamic

Development Bank, the Government of Dubai and

Qatar’s massive $4bn Sukuk.

New sovereign Sukuk are becoming ever

more common in the marketplace with both Hong

Kong and Sharjah issuing record breaking Sukuk

in recent months. In the case of Hong Kong, its

maiden Sukuk for $1bn was oversubscribed 4.7

times while Sharjah’s Sukuk was oversubscribed

10 times. Sheikh Mohammad’s advice to

prospective issuers is clear: “Give some thought to

a Sukuk issuance. In doing so, you will open up a

very large of pool of Islamic liquidity, a pool that

represents an alternative source of funding that is

currently unavailable to you in that it cannot hold

conventionally-structured assets. The overall cost

of finance will be as competitive as a conventional

bond issue. The recent UK Government Sukuk

was priced on the yield curve for UK Gilts with

no ‘Islamic premium’. Capital markets origination

is an intellectual capital business and our success

depends upon the quality of the team that we are

able to put in front of a potential issuer and the

integrity of advice that we are able to deliver …our

proven track-record creates a powerful credential

and gives confidence to prospective issuers.”

The Barwa Bank Group is very proud of the

fact that it is Qatar’s fastest growing Shari’ah

compliant bank. This in itself is no mean

achievement in an industry that sees many banks

from the big end of town trying to muscle in on

juicy transactions. It is not unusual to see Citi,

HSBC and Standard Chartered appearing on the

prospectus documents of new Islamic debt market

instruments. It is equally common these days to

see the region’s conventional banking giants join

in too, with the like of NBAD making its weighty

presence known wherever it can.

So it must have been with some relish that the

team at Barwa Bank announced financial results

for the first half of 2014 that hark back to the good

old days before the global financial crisis (

see box

).

Aquick look at Barwa Bank’s recent activity shows

a bank that is fine-tuning its operations to take

advantage of new markets and new technologies as

it races to stay ahead of the pack.

Recent months have seen the bank launch a

new mobile banking application for its customers

as part of the bank’s investment in digital channels

and services, allowing its customers to manage

account information anytime, anywhere. This is

clearly no passing fad, as Sheikh Mohammad

points out, “All banks appreciate the potential

around technology, though it is probably fair to

say that the Islamic banks have been slower to

respond to the opportunity than our conventional

competitors. The central and most obvious way in

which technology is changing lives is in the ability

to manage relationships remotely be it through

increasingly

sophisticated,

functionally-rich

websites andmore recently,mobilebanking through

tablets and mobile phones. That technology, and

progress in data-mining, also allows us to be far

more focused and intimate with our customers in

the way in which we communicate with them and,

more specifically, the ideas and opportunities that

we are able to bring to their attention.”

The bank has also made sure that it plays a

leading position in niche, but growth, areas of

the market such as Islamic wealth management.

Shari’ah compliant wealth management is a

notoriously underserved sector and one that

Barwa Bank takes very seriously. “Islamic wealth

management has very significant potential,” says

Sheikh Mohammad. “The stock of global financial

assets is estimated at more than $200tn. total

Islamic financial aggregates are forecast to break

the $2tn threshold this year. By inference, the vast

majority of Muslims worldwide hold most of their

wealth in conventional form and an institution

that can deliver sophisticated Shari’ah compliant

product that offers attractive return,

flexibility and convenience will find

a very receptive market.”

In many ways what Sheikh

Mohammed is summing up is the

conundrum that faces any finance house

that attempts to offer a comprehensive

suite of Shari’ah compliant wealth management

products. “Identifying suitable investment

opportunities and structuring them in a format

acceptable to our customers is not without its

challenges but we see this as a major area of

growth in the years ahead, not least because the

success of our economy over the last few

years has created large numbers of people

who have accumulated capital and wish

to both preserve and grow it. Through our

wholly owned investment banking boutique, the

First Investor, we are able to structure distinctive

investment opportunities that we offer on an

exclusive basis to the bank’s private banking

customers,” says Sheikh Mohammed.

But how practical it is for an Islamic wealth

manager to offer a range of products that pass the

Shari’ah test? Barwa Bank believes that is has

the problem solved: “Examples would include

our medium-term, closed end real-estate funds

that offer both income across the life of the fund

and the possibility of upside through capital

gain at termination. We offer both domestic and

international opportunities. Good examples might

include our Education Fund and our UK income

fund. We also offer access to the regional securities

markets through our GCC Equity Opportunities

Fund which invests in Shari’ah compliant quoted

companies and is currently outperforming industry

indices and benchmarks.”

Naturally enough, only a small fraction of

Qatar’s residents are likely to want or need wealth

management services of any sort. So, what part

can individual finance industry participants in

the GCC play in helping to modernise the way

of life of ordinary Arabs across the Middle East?

Sheikh Mohammed sees a big role for banks:

“I think there are two areas where the finance

industry has a critical role: home-ownership is a

universal aspiration worldwide but is invariably

dependent upon the development of a long-

term mortgage market. Progress is being made

in this area but we have a long way to go in

terms of making affordable, long-term finance

broadly available. The other area is the

establishment of a long-term savings culture and

a private pensions industry. State pension schemes

are developing rapidly but global market experience

is that they are most effective when complemented

by private provision, whether through workplace

schemes or on a ‘portable’ basis. Banks can take

the lead in both.”

It is very clear that Barwa Bank is only at the

very start of a long growth trajectory and that this

will encompass both domestic and international

moves. The bank took the plunge and in recent

months opened a representative office in the

Dubai International Financial Centre. Khalid Al

Subeai, acting CEO said, “This is the first time

Barwa Bank has opened an office overseas and

is testament to our commitment to developing the

Shari’ah compliant financial market outside as well

as within Qatar.”

But the bank is not likely to take its eye off

the domestic prize, which is shaping up to be

huge indeed. The GCC as a whole is seeing

unprecedented levels of construction and growth

with many of the projects being undertaken

dwarfing corresponding projects in previous

decades. Some nations are building enormous ports

and airports and some are readying themselves for

major sporting competitions. Qatar is doing all of

the above and the project-financing menu for the

next decade or more is tempting indeed.

The last word goes to Sheikh Mohammad:

“Our first priority is to maximise the potential

presented by our domestic franchise as Qatar

embarks on the next wave of infrastructural

development. Over the next decade we will see the

realisation of major plans for transport, electricity

generation, desalination, education, health

and, more broadly, Qatar’s transition to a more

balanced, diversified economy. We are determined

to play a leading role in that development and I

see this as our primary engine-of-growth over the

next 3-5 years. We also have high expectations for

the continuing development of our Islamic capital

markets business, domestically, regionally and

internationally.”

Banking has become an

increasingly competitive in-

dustry and one in which only

the strong survive. Just ask the

survivors of late Banco Espírito

Santo. The Islamic banking sec-

tor is possibly more competi-

tive still and it takes brains as

well as a positive balance sheet

to thrive.

T

o the outside observer, Qatar Central

Bank’s decision in 2011, forcing conven-

tional banks to close their Islamic banking

windows, looked like a windfall opportunity for

the existing Islamic banks in the country. But this

conceals the fact that the Islamic banking space has

become increasingly competitive domestically, re-

gionally and globally. It is a sector that is becoming

progressively more integrated with the rest of the

financial services spectrum and this means that the

pressure to perform on Islamic banks is as great,

if not greater, than their conventional counterparts.

Islamic banking technically started in Qatar

in 1983 with the establishment of Qatar Islamic

Bank, but it was not until 2005 that the market

really opened up and conventional banks were

allowed by the Qatar Central Bank (QCB) to offer

Shari’ah compliant finance products to clients

through Islamic windows. However, in a surprise

move by the QCB these windows were closed back

in February 2011, prompting several conventional

banks such as HSBC to shut shop on their Islamic

businesses in Qatar.

Off the back of QCB’s ban, the country’s

fully-fledged Islamic banks surged as expectations

rose about the possibility of attracting money that

was leaving the defunct windows. Great news for

Qatar’s big four full-fledged Islamic banks – Qatar

Islamic Bank, MasrafAl Rayan, Qatar International

Islamic Bank and Barwa Bank.

Three years on and despite the effect of the

window closures having now faded, the big four

are standing firm having added 57.5bn riyals of

assets to their balance sheets, with the youngest of

the four – Barwa Bank – proving its mettle both at

home and abroad.

To many investors in the UK and Europe the

name of Barwa Bank will already be familiar as

one of the leading players behind the UK’s recent

headline-grabbing Sukuk issue. Her Majesty’s

Treasury was delighted that the nation’s inaugural

£200m sovereign Sukuk, maturing in July 2019,

had been sold to investors based in the UK and

in the major hubs for Islamic finance around the

world so successfully.

The Sukuk saw strong demand, with orders

totalling £2.3bn, in large due to the work of the lead

arranger and managers, allocations were made to a

wide range of investors including sovereign wealth

funds, central banks and domestic and international

financial institutions. Investors from the major

centres for Islamic finance in the Middle East,

Asia and Britain were all represented in the final

allocation. Barwa Bank was the only Qatari bank

selected and the only wholly Shari’ah compliant

mandated bank on the panel. The UK’s own cabal

of Islamic banks were reported to be peeved that

they were not invited to the table, but with the offer

more than 11 times oversubscribed it is not likely

that the Treasury will be losing much sleep over

their complaints.

“We were delighted to be appointed for

this prestigious transaction alongside major

international and regional banks. Securing a

mandate like this one is the clearest statement of

our credibility, track record, solid relationships

and delivery. We are very ambitious and have

proven that we have the energy, enthusiasm and

capabilities to be part of this process,” said Sheikh

Mohammad Bin Hamad Bin Jassim Al Thani,

chairman and managing director of Barwa Bank.

But this was clearly more than simply an

Islamic debt capital markets deal for the bank. It

was also about Barwa Bank contributing to the

180

160

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0

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B A R W A B A N K P R O F I T G R O W T H 2 0 1 0 - 2 0 1 4

12 months to

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N e t p r o f i t u s $ m

LOOKING at the profit growth of Barwa Bank over recent years,

results that might justifiably be termed stellar, could tend to suggest

that the ascent of Qatar’s economy was largely the cause. But

this would be misleading. At a time when banks across the globe

are slashing headcounts and coming to grips with stringent

new Basel III capital adequacy standards, Barwa Bank has

manoeuvred itself into lucrative business niches and expanded its

franchise geographically to take advantage of opportunities as they

have arisen.

The bank’s history is short indeed. The bank was incorporated

as a Qatari Private Shareholding Company in January 2008 and

in December 2012, the Ministry of Business and Trade approved

conversion of the bank to a Qatari Shareholding Company. Barwa

Bank secured its banking license from Qatar Central Bank in

February 2009 and started operations in July 2009. As the chart

shows, it has come a long way in a short time.

The bank is 18.67 per cent owned by General Retirement and

Social Insurance Authority, 18.67 per cent by Military Pension Fund

(Qatar) and 12.13 per cent by Qatar Holding, the investment arm

of Qatar Investment Authority, the sovereign wealth fund of Qatar.

The balance of the share register is privately held, owned by several

individuals and corporate entities.

The group is justifiably proud of the fact that it is Qatar’s fastest

growing Shari’ah compliant banking service provider. Its recent 35

per cent profit lift for the first six months of the year to $113m will

have hearted its shareholders no end. The balance sheet recorded

significant growth with an increase in total assets of 28 per cent to

reach $9.77bn compared to the second quarter of 2013.

Sheikh Mohammad Bin Hamad Bin Jassim Al Thani, chairman

of Barwa Bank Group said, “We were able to strengthen our presence

in the Qatari market significantly and took part in many important

deals during the first half of this year which reflected positively on

the financial performance of the Group. We are keen to continue this

positive performance in greater pace throughout the remainder of this

year, and hope to contribute more to the Qatari banking sector and

increase value to our key stakeholders.”

Ethical,

sustainable, progressive

PAUL MCNAMARA

BUSINESS REPORTER

Sheikh Mohammad Bin Hamad Bin Jassim Al Thani, chairman and managing director of Barwa Bank and the company’s HQ

The Barwa

Bank Group is

very proud of

the fact that it is

Qatar’s fastest

growing Shari’ah

compliant bank.

This is itself no

mean achievement

in an industry that

sees many banks

from the big end

of town trying to

muscle in on juicy

transactions.

‘‘

‘‘

A rising tide

lifts all boats